Cutting Fletcher Building's FVE To NZD 7.10 Due To Construction Losses; Shares Overvalued

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Equity Capital Markets

Fletcher Building / Equity Capital Markets

<p>We’ve reduced our fair value estimate for no-moat <a href="https://www.smartkarma.com/entities/14508" target="_blank" data-smartkarma-citation="entities:14508:1">Fletcher Building Ltd (FBU NZ)</a> to NZD 7.00 (AUD 6.60) from NZD 7.50 (AUD 7.00) following the firm’s announced rights issue, updated lender agreement, and plans to divest its Formica and Roof Tile businesses. While we appreciate these transactions will lower the company’s balance-sheet risk, the equity offer’s steep discount to our fair value estimate dilutes shareholders more than we had anticipated. Nonetheless, we’ve also moved our uncertainty…</p>

We’ve reduced our fair value estimate for no-moat Fletcher Building Ltd (FBU NZ) to NZD 7.00 (AUD 6.60) from NZD 7.50 (AUD 7.00) following the firm’s announced rights issue, updated lender agreement, and plans to divest its Formica and Roof Tile businesses. While we appreciate these transactions will lower the company’s balance-sheet risk, the equity offer’s steep discount to our fair value estimate dilutes shareholders more than we had anticipated. Nonetheless, we’ve also moved our uncertainty…

Corporate Action: Fletcher’s Equity Raise Dilutes Owners, but Tames Risk; Take Up Rights Offering